MVB & SDB

[2005] FamCA 389

[2005] FamCA 389

FAMILY LAW ACT 1975

IN THE FULL COURT OF

THE FAMILY COURT OF AUSTRALIA

AT BRISBANE

Appeal No. NA 55 of 2004

File No. BRF 53 of 2004

IN THE MATTER OF:

MVB

Appellant/Wife

- and -

SDB

Respondent/Husband

REASONS FOR JUDGMENT

BEFORE:Kay, May and Boland JJ

HEARD:15 February 2005

JUDGMENT:             19 May 2005  

APPEAL SUMMARY

MATTER:MVB and SDB

APPEAL NUMBER:  NA 55 of 2004 (BRF 53 of 2004)

CORAM:Kay, May and Boland JJ

DATE OF HEARING:  15 February 2005

DATE OF JUDGMENT:  19 May 2005

CATCHWORDS:

APPEAL – Property – 32 year marriage – Whether trial Judge erred in finding the husband’s contribution entitlement was 65 per cent – characterisation of, and weight given to, initial contributions by the husband and the acquisition of a cane farm on non commercial basis from his parents – Whether trial Judge erred in making a s 75(2) adjustment of 2.5 per cent in favour of the wife – disparity in financial position of parties and wife’s lack of earning capacity –– Whether orders made were just and equitable –  Whether trial Judge erred in dismissing wife’s application for spousal maintenance – Although the initial contributions and the cane farm constituted a significant contribution they must be weighed and balanced against the myriad of other contributions made by the wife during the course of the marriage – Stark contrast in earning capacity of parties – Orders neither just nor equitable – Re-exercise of discretion – husband’s contribution entitlement is 60 per cent – s 75(2) adjustment of 2.5 per cent appropriate in light of wife’s increased contribution entitlement – costs certificates granted

Mallet v Mallet (1984) 156 CLR 605

Australian Coal and Shale Employees’ Federation v The Commonwealth (1953) 94 CLR 621

Norbis v Norbis (1986) 161 CLR 513

Ferraro and Ferraro (1993) FLC 92-335

Dawes and Dawes (1990) FLC 92-108

Pierce v Pierce (1999) FLC 92-844

Mitchell and Mitchell (1995) FLC 92-601

Appeal allowed.

Introduction

1. This is an appeal by the wife against orders made by Carmody J on 9 September 2004 under s 79 of the Family Law Act 1975 (Cth) (“the Act”). The parties’ marriage was a lengthy one of approximately 32 years duration. The effect of the trial Judge’s orders was to divide the parties’ property, which had an agreed value of $2,368,791, between them in proportions of 62.5 per cent to the husband and 37.5 per cent to the wife. The trial judge dismissed an application by the wife for spousal maintenance.

2. The wife’s appeal in respect of the property orders falls essentially into two broad areas.  The wife asserts that the trial Judge’s characterisation of, and weight given to, initial contributions by the husband and the acquisition of a cane farm from his parents on a non-commercial basis, after the parties had been married for ten years, was in error and manifestly excessive.

3. The trial Judge found the acquisition of the cane farm should be regarded as a gift to the husband from his parents, and parties’ contribution based entitlement should be assessed at 65 per cent to the husband and 35 per cent to the wife, an effective differential between the parties’ entitlements of approximately $710,000.

4. The second principal basis of the appeal is directed to the adjustment of 2.5 per cent made by the trial Judge in the wife’s favour under s 75(2).  The wife asserts this adjustment was inappropriate, particularly having regard to her income earning capacity compared to that of the husband.  The wife further asserts that the trial judge should not have dismissed the wife’s application for spousal maintenance when the unchallenged evidence before the Court was that her reasonable weekly needs exceeded her income after the implementation of the property settlement orders, and that the husband had the capacity to contribute to the wife’s reasonable needs.

5. The wife in her Notice of Appeal sought, on the re-exercise of discretion by us, that she receive, when payable, the whole of the husband’s interest in the self managed superannuation fund and that there be a splitting order in respect of the husband’s Defence Force Retirement and Death Benefits Superannuation Fund (“DFRDB”) such that she receive 50 per cent of the husband’s entitlement.  She also sought a further cash adjustment from the husband of $504,076.  Before us counsel for the wife submitted that the parties’ contribution based entitlements should be assessed at 55 per cent to the husband and 45 per cent to the wife.  Counsel for the wife conceded that should the appeal be allowed and if the wife’s contribution based entitlement on a re-exercise of discretion was or exceeded 40 per cent of the asset pool as found by the trial Judge, the wife would not pursue her spousal maintenance claim.

Background

1. The husband was aged 58 years at the date of the trial and the wife was aged 57 years.

2. The parties were married in August 1971.  They separated under the one roof in November 2003 and physically separated in December 2003.  There are two children of the marriage, [G] born in 1977 and [S] born in 1980.  At the date of the trial both of the parties’ adult daughters were living in Brisbane. 

3. At the commencement of cohabitation the wife was employed on a full time basis as a secretary/receptionist and the husband was a member of the Royal Australia Navy (“the navy”), having joined the navy in 1962. 

4. At the date of the marriage the husband had an interest in the DFRDB, a motor vehicle and some small savings.  The wife had no assets of significance. 

10.  Approximately 18 months after the marriage the wife resigned from her employment in order to accompany the husband to the United Kingdom.  The wife thereafter did not engage in paid employment.

11.  After she ceased employment, the wife engaged in homemaking tasks and was the primary caregiver of the parties’ two children.

12.  The parties purchased their first home on the Upper North Shore of Sydney (“the  first property”) from the wife’s mother.  The first property was purchased using the husband’s cash savings of $1,000 and the balance of the purchase price was obtained by borrowings from the Commonwealth Bank.  The first property was rented for two years whilst the parties lived in the United Kingdom.  It was thereafter rented whilst they lived in Canberra and the rental income was applied to the mortgage payments. 

13.  The first property was sold in about 1978 for $55,000.

14.  In 1978 the parties purchased a property in Canberra (“the second property”) for a purchase price of $54,000.  The second property was purchased with the proceeds of the first property and borrowings by way of a war service loan.

15.  In 1981 the husband retired from the navy and received a lump sum payment of $48,218.63 comprising accrued annual leave and a lump sum commutation of his DFRDB entitlement of $34,064.80.  He also received, and was in receipt at date of trial, a pension payment from the DFRDB.

16.  The parties sold the second property at the time of the husband’s retirement from the navy and received net proceeds of sale of approximately $76,000.

17.  The husband entered into an agreement with the husband’s parents to acquire a cane farming property in northern New South Wales (“the cane farm”).  The cane farm was operating as a sugar cane property at the time the parties took over its operation in 1981 and was continuing in use as a sugar cane property at the date of hearing. 

18.  The cane farm was valued, when transferred into the husband’s name in June 1983, at $425,000. 

19.  At the time of the husband’s retirement from the navy the parties used part of their capital to buy an investment unit on the Gold Coast.  The unit was let for holiday rentals.  It was sold in 1999 for $156,000 and the net proceeds of sale were invested in shares and superannuation. 

20.  Pursuant to the agreement with the husband’s parents, the parties paid $16,000 to them to enable the husband’s parents to finish their retirement home or to pay the husband’s parents’ tax liability.

21.  The husband’s parents assigned sugar licences owned by them to [F] Pty Ltd (“[F]”).  The husband and wife were the directors and shareholders of [F].

22.  Pursuant to the agreement between the husband and the husband’s parents [F] paid 10 per cent of the gross sales from sugar to the husband’s parents until the date of their respective deaths.  Payments totalling approximately $114,000 were paid between 1982 and 1994.  The parties referred to these payments as the “lien payments”.

23.  The wife asserted, in addition to the lien payments, income generated from the farm in 1981 was used for wages of employees and outstanding accrued accounts, and the parties did not receive any income from the farm in that year.

24.  In 1994 the husband received the sum of $212,880 by way of inheritance from his late father’s estate.

25.   In November 2003 the parties located and purchased a property in Brisbane (“the third property”) following an auction for the amount of $367,000.  The third property was purchased in the wife’s sole name.  The wife was living in the third property at the date of the trial. 

26.  In January 2004 the wife was advised she was not eligible for any Centrelink pension or benefit.  The wife derived her income from interest on monies in her bank account earning $209 per month.  The husband was in receipt of all of the income from the cane farm after separation, and a fortnightly Comsuper payment of $658.67 net per week.

27.  On 5 February 2004 the wife withdrew the sum of $19,000 from the parties’ business account and used these funds for maintenance and repair to the third property, renovations to that property, the purchase of furniture and assisted with the support of the parties’ daughters.

The trial Judge’s judgment

28.  The trial Judge noted the parties’ competing applications for property settlement and the wife’s application for spousal maintenance.  His Honour recorded the wife sought an equal division of the parties’ net assets, together with maintenance of $600 per week for five years, or in the alternate, a lump sum equivalent to 2.5 per cent of the matrimonial pool.  He also noted the husband’s position that contribution based entitlements should be assessed at 65 per cent of the parties’ assets and liabilities to reflect his initial contribution of accrued superannuation entitlements, the subsequent contribution of the cane farm, and the inheritance of $212,888 received from his father in 1994.  He noted the parties were not in dispute that the full balance of the parties’ self managed superannuation fund, and half of the husband’s interest in his DFRDB entitlement, be transferred to the wife with the balance of her entitlement to be received in cash.

29.  The trial Judge set out the parties’ list of assets and liabilities which had been agreed by the time of the trial, save and except for the husband’s shareholding in a sugar mill.  The trial Judge found that the shares should be regarded as property, and added them to the total pool of property to arrive at a pool of $2,397,606.  There is no challenge to his Honour’s finding in this respect.

30.  The trial Judge set out a brief history of the parties’ relationship and their acquisition of assets.  His Honour noted:

“The parties agree, and I am satisfied that, subject to the weight that ought to be given to the husband's initial contribution of superannuation entitlements and his contribution of the sugar-cane farm in 1982 or on his behalf, and the inheritance of $213,000.00 in 1994, their contribution-based entitlements should be assessed at 50:50.”

31.  The trial Judge recorded the competing submissions of each party’s counsel in respect of the appropriate weight to be given to the acquisition by the husband of the cane farm.  At paragraphs 60 - 61 of his reasons the trial Judge recorded:

“The gift of the farm had the effect of increasing the parties’ net wealth more than five-fold from $85,700.00 to $510,700.00.  It has been the principal source of family income since then and is the major asset in the available pool.  The farm has increased in value by $965,000.00 or 200 per cent since 1982. 

At current day values, it represents almost 50 per cent of the divisible pool.  Its receipt in 1982, instead of 1994 when his father died, meant the shared financial benefit and enjoyment of the farm for an additional 14 years at a cost of 10 per cent of the gross income from the crop.” 

32.  The trial Judge found that the contribution of “the farm should be seen as a very weighty capital contribution by or on behalf of the husband”.  His Honour qualified this finding noting “However, the wife obviously made some contribution to its acquisition and improvement and it has never really been treated as the husband’s separate property”. 

33.  The trial Judge further found that the wife contributed to the cane farm financially in indirect ways and non-financially for nearly 20 years.  He found the wife’s contribution to “the business conducted on the farm was largely limited to that of a supportive spouse, predominantly in the role of homemaker rather than as a business partner or offsider”.  The trial Judge noted the submission of the wife to the effect that the inheritance received by the husband from his late father’s estate in 1994 should not be treated as a contribution by the husband alone, the inheritance including the sum of $114,000 paid to the husband’s father in part consideration for the farm.

34.  The trial Judge rejected the submission, made on behalf of the wife, that the husband had, by the payment of $114,000, contributed to his own inheritance.  The trial Judge found “The legacy was a classic windfall and, without it, the property available for distribution between the parties would have been worth considerably less.”  The trial Judge summed up his findings in respect of the parties’ contribution entitlements at paragraph 67 as follows:

“Having regard to the substantial size, continuing significance and proportional weight of the husband’s capital contributions to the property pool, especially the farm in 1982 and the inheritance in 1994, and giving full value to the wife’s own contribution to the family wealth and welfare both directly and indirectly, financially and otherwise, over the 32 years of marriage, I conclude that the total property at the date of hearing should be divided 65:35 in favour of the husband.  This would give him net property to the value of $1,539,715.00 and $829,076.00 to the wife.”

35.  The trial Judge then dealt with relevant s 75(2) factors.  His Honour made findings that the parties were of similar age and in reasonably good health. 

36.  In assessing their respective financial positions the trial Judge noted that “The wife is debt free”.  He also noted her occupation of the third property and that she had a quality motor vehicle. 

37.  The trial Judge found that, although the husband was in his late 50s, he had a substantial earning capacity as a cane farmer.  He also noted the husband’s desire to continue working the farm, but in the event that it was sold found that he could obtain gainful employment has a farm manager.

38.  The trial Judge noted the wife had not participated in the workforce for almost 30 years, had no current qualifications, training or experience and concluded that her employment prospects were low.  His Honour noted the wife sought an adjustment under s 75(2) of 7.5 per cent of the total asset pool.  He also noted the contentions of the husband that the wife was able to maintain a reasonable standard of living without the need to seek or maintain gainful employment.

39.  At paragraph 78 of his reasons the trial Judge noted:

“There is an obvious discrepancy in the current income and future income-earning capacities of the parties but that does not automatically mean that an adjustment under s 75(2) is warranted.”

40.  The trial Judge recorded his finding that the separation had “harmed the economic prospects of the wife more than the husband”.  His Honour concluded:

“Accordingly, although some might see this as overly generous, I think that the wife should receive an additional provision out of the existing assets of 2.5 per cent in view of the income disparity attributable to the marriage, her weaker capital and future income position, the length of the marriage, the effect it has on her earning capacity,  the standard of living enjoyed by the parties during it,  and employment opportunities foregone as a consequence of supporting the husband on the farm and within the family.”

41.  He concluded that such an adjustment would result in the wife receiving $888,296 which sum included a 50 per cent interest in the husband’s DFDRB with the husband retaining assets to the value of $1,480,495 including the remaining 50 per cent interest in the DFDRB, thus requiring a cash adjustment by the husband of $193,569 to the wife. 

42.  The trial Judge then dealt with the wife’s application for spousal maintenance.  He noted that the wife’s Form 13 filed on 15 July 2004 set out the wife’s average weekly expenditure of $290, and a total average weekly income of $120.

43.  The trial Judge found that the husband had a weekly income of $790 and average weekly fixed expenses of $228.  His Honour noted the husband did not disclose his living and household expenses for himself.  He found that the husband did have a capacity to contribute to the maintenance of the wife. 

44.  At paragraph 94 the trial Judge concluded:

“However, as a consequence of the orders for settlement of property the wife will have extra income of $190.00 per week from her half of the husband's defence pension, plus immediately accessible superannuation benefits totalling $85,000.00 and a cash settlement of $193,569.00 which, combined with the superannuation entitlement and invested at 5 per cent per annum, would bring in an extra $460.00 a week.”

45.  The trial Judge therefore concluded that the wife had income “sufficient for her reasonable future needs” and dismissed the wife’s spousal maintenance claim. 

Grounds of appeal

46.  At the commencement of the hearing before us counsel for the wife, abandoned grounds 4 and 5(d) of the wife’s Notice of Appeal.  The grounds of appeal relied on by the wife before us were:

“1. That his Honour erred in assessing the contribution based entitlement pursuant to s 79 as 65% to the Husband and 35% to the Wife (a difference of $710,639) in circumstances were (sic) his Honour found:-

(a)  That the available net property pool was $2,397,606; and

(b)   That the parties contributions (other than the ‘extra marital’ contributions by the Husband) were equal over the course of a 32 year marriage; and

(c)  That the ‘extra marital’ contributions on the Husband’s side comprised:-

(i)a cane farm (worth $425,000) transferred by the Husband’s Father in return for $32,000 together with lien payments of 10% of the gross income of the farm for the life of the Father (which subsequently totalled $115,000); and

(ii)An inheritance of, $212,888 in or about 1994, comprised in part by the $115,000 lien payments referred to (b) hereof;

(ii) (sic) an unquantified amount of superannuation resulting from 10 yrs navy service as at the date of the marriage.

2. That his Honour erred in assessing the contribution based entitlement pursuant to s 79 as 65% to the Husband and 35% to the Wife (a difference of $710,639) due in part to the Wife’s contribution to the cane farm having been ‘largely limited to that of a supportive spouse, predominantly in the role of homemaker rather than as a business partner or offsider.’ And thereby undervalued the Wife’s contribution.

3. That his Honour placed undue weight on:-

(a)   the Transfer of the cane farm by the Husband’s Father to the Husband in 1982 for the consideration found; and

(b)   the apparent contribution of the cane farm to the income of the parties during the course of the marriage; and

(c)   the comparative current percentage significance of the value of the cane farm contrasted to the asset pool; and

thereby effectively quarantined that asset in circumstances where his Honour had correctly found that an asset by asset approach was not appropriate in the circumstances of a 32 year marriage with 2 children having grown to adulthood and financial independence.

4. [Abandoned]

5. That his Honour erred in finding that the cane farm should be characterised as an inter vivos gift to the Husband by his father in circumstances where His Honour found that the consideration for the transfer of the cane farm included:-

(a)   $16,000 to meet a taxation liability;

(b)   $16,000 to assist the father to complete work on the retirement home; and

(c)   a lien of 10% of the gross proceeds of future cane crops for the, in circumstances where his Honour ought to also have found that

(d)   [Abandoned]

(e)   the Husband’s father was a comparatively young man being 67 years old, in good health, who in the reasonable anticipation of all involved at the time of the agreement would have been expected to live substantially longer than he did; and

(f) the Husband and the Wife had worked on the cane farm for 18 months prior to the transfer and in that time had paid for the running expenses of the cane farm for which they had received no remuneration or recompense and should therefore have characterised the transfer of the cane farm as an acquisition by the parties of an asset for value (past benefits conferred, present cash and crop and annuity for life) and any subsequent improvement in value or use to earn income should have been attributed to the efforts of them both.

6. That his Honour erred in assessing the contribution based entitlement pursuant to s 79 as 65% to the Husband and 35% to the Wife (a difference of $710,639) in the circumstances where the total financial contribution of the Husband identified by his Honour was $425,000 for the cane farm, (less any amount paid in return) together with an inheritance of $212,888 in or about 1994 (comprised in part by accumulated payments for the cane farm); plus an identified amount for accrued superannuation and long service leave where such resulted in an entitlement exceeding $700,000 of the current available pool.

7. That his Honour erred in concluding that an adjustment of only 2.5% should be made in favour of the Wife pursuant to s75(2) having found:-

(a)   That the Wife had little or no residual earning capacity having regard to 32 years of marriage in which she did not return to paid employment; and

(b) That the Husband retained a significant earning capacity either as proprietor of the cane farm or as a manager of a property.

8.That his Honour erred in concluding that an overall result of 37 ½ % to the Wife and 62 ½ % to the Husband of an available pool of $2,397,606 was just and equitable in the circumstances of:-

(a)   a 32 year marriage;

(b)   Equal contribution by the parties (other than extra marital contributions);

(c)   The raising by the parties of 2 children to adulthood;

(d)   The residual earning capacity of the Husband contrasted to that of the Wife;

(e)  A lifestyle which in all the circumstances was reasonable having regard to the circumstances of the case.

8. (sic) That his Honour erred in concluding that the Wife’s application for spousal maintenance should be dismissed as she had not satisfied the Court that following implementation of the property orders she could not support herself adequately within the meaning of s.72 of the Act where his Honour had found;-

(a)   That the Husband had the capacity to contribute to the maintenance of the Wife; and

(b)   That following property adjustment, the Wife would have a potential available income of $460.00 per week; and

(c)   that the Wife’s expenditure prior to such property adjustment was in the sum of $290.00 per week

in circumstances where the unchallenged evidence before the Court of the reasonable weekly needs of the Wife was in the sum of $729.00.”

47.  We find it convenient to address the grounds of appeal under the three broad areas identified by counsel for the wife, namely the trial Judge’s treatment of the parties’ contribution based entitlements, the asserted inadequacy of an adjustment of 2.5 per cent pursuant to s 75(2) having regard to the disparity in the parties’ capital positions and respective earning capacities, and finally the trial Judge’s dismissal of the wife’s spousal maintenance application.

Relevant law

48.  The law governing this appeal is not in doubt.  In Mallet v Mallet (1984) 156 CLR 605 at 634, Wilson J, quoting Kitto J in Australian Coal and Shale Employees’ Federation v The Commonwealth (1953) 94 CLR 621, said:-

"... the true principle limiting the manner in which appellate jurisdiction is exercised in respect of decisions involving discretionary judgment is that there is a strong presumption in favour of the correctness of the decision appealed from, and that that decision should therefore be affirmed unless the court of appeal is satisfied that it is clearly wrong. A degree of satisfaction sufficient to overcome the strength of the presumption may exist where there has been an error which consists in acting upon a wrong principle, or giving weight to extraneous or irrelevant matters, or failing to give weight or sufficient weight to relevant considerations, or making a mistake as to the facts. Again, the nature of the error may not be discoverable, but even so it is sufficient that the result is so unreasonable or plainly unjust that the appellate court may infer that there has been a failure properly to exercise the discretion which the law reposes in the court of first instance: House v. The King (1936) 55 CLR 499, at pp 504, 505."

49.  In Norbis v Norbis (1986) 161 CLR 513 at 540, Brennan J said:-

“The ‘generous ambit within which reasonable disagreement is possible’ is wide indeed when there are a number of factors to be taken into account and the comparative weight to be attributed to those factors is not clearly indicated by uniform standards and values of the community. The generous ambit of reasonable disagreement marks the area of immunity from appellate interference.”

1. The contribution grounds

50.  In his written submissions counsel for the wife effectively submits, having found that the parties’ contributions, direct and indirect, financial and non-financial to the conservation, acquisition and improvement of their property during their 32 year marriage were equal, the trial Judge was in error in arriving at a 30 per cent or $710,639 disparity in their contribution based entitlement based on the transfer of the cane farm from the husband’s parents to the husband, his inheritance and his unquantified entitlement in the DFRDB from his 10 year service in the navy prior to 1971. 

51.  It is further submitted on behalf of the wife that the trial Judge in his assessment of contributions did not confine the transfer by the husband’s parents of the cane farm as a contribution at the time it was made, but also characterised it as the source of the family’s income and benefits and that it represented almost 50 per cent of the net pool of assets of the parties.  The wife submits “In doing so, his Honour effectively treated the capital increase, income and benefits derived from the cane farm as an income earning, capital gaining asset which required no contribution from either the Husband or the Wife”.  

52.  It is further submitted on behalf of the wife that the trial Judge erred in so characterising the cane farm without taking into account the efforts of the husband and wife in working the farm and investing their personal efforts and resources in earning income, and in particular, failing to recognise the wife’s contribution facilitating the husband to exert his personal efforts by attending to household duties and care of the children of the marriage.  It is further asserted that the trial Judge erred in distinguishing the wife’s contribution to the cane farm as homemaker and parent rather than as “a partner or offsider”.  The wife submits the trial Judge should have characterised the transfer of the cane farm as a contribution made by the husband’s parents on behalf of the husband at a particular value at that point in time, and thereafter to consider that contribution along with all other contributions of the parties over their 32 year marriage.

53.  The wife also submits that the trial Judge erred in characterising the cane farm as an inter vivos gift from the husband’s parents to the husband in the light of the unchallenged evidence of both the husband and the wife of the agreement between the husband and his father whereby the husband was to obtain the farm conditional on making payments to the husband’s parents during their lifetime of 10 per cent of the gross proceeds of sale of the sugar produced at the cane farm. 

54.  In summary, it is submitted that the total value of contributions made by the husband’s parents have been overvalued, and that the trial Judge erred in characterising payment by the parties to the husband’s parents of their tax liabilities and monies to complete the retirement home “as gifts to the parents but...not...as a matter which affected the contribution by the Husband as a result of the transfer of the cane farm to him”.  It is therefore submitted that the trial Judge effectively quarantined the cane farm, its improvement in value, and any income derived from it, as being a matter attributable to the husband alone.

55.  By contrast, it is submitted on behalf of the husband that the trial Judge did not err in attaching the weight he did to the acquisition of the farm “in the circumstance that its value comprised 58 per cent of the property pool at the date of the trial”.  It is further submitted the trial Judge did not quarantine the farm in assessing its contribution as extremely significant “for the generation of the parties’ property pool at trial”.  It is further submitted on behalf of the husband that “the trial Judge did not ‘double count’ the farm as a contribution by the husband”.  It is asserted there were two aspects of the husband’s farm related contribution, namely, the actual receipt of the farm from his parents, and the subsequent labour he performed on the farm which produced the parties’ income from 1984 until the date of separation.  It is further submitted on behalf of the husband that the trial Judge mistook the evidence given by both parties, about payments made to the husband’s parents, the parties each agreeing that only one payment and not two payments of $16,000 was made.  It is submitted that the trial Judge was correct in characterising such a payment as a gift from the parties to the husband’s parents “since the parties had no liability for such a payment”.  It is submitted therefore that “[s]uch a gift by the parties to the husband’s parents could not, given the value of the farm at the time the gift was made, have been considered to offset the gift of the farm”.  It is further submitted that the lien payments did not offset the value of the gift to any significant extent. 

56.  In conclusion it is submitted on behalf of the husband that “[t]o allow the husband $710,639 more than the wife on the basis of his contributions – specifically his contribution of the farm and the contribution of the inheritance later in the marriage -  is obviously reasonable when the farm alone at trial had a value of $1.39 million”.

Conclusions - contribution grounds 

57.  The parties’ marriage was a long term one of 32 years duration.  The trial Judge noted that the husband’s initial contributions essentially comprised his unquantified superannuation entitlements.  The wife’s unchallenged evidence is that on his retirement from the navy, after 20 years service and 10 years after the parties’ marriage, the husband received a lump sum of $48,218.63 (referred to by the trial Judge as a lump sum of $48,000).  The wife’s unchallenged evidence is that this sum comprised $14,153.83 by way of accrued annual leave and that the amount referrable to the husband’s superannuation entitlement was $34,064.80.  We are satisfied that, absent the other contributions by or on behalf of the husband, that the husband’s initial contribution of his DFRDB of itself would not warrant a significant weighting in the husband’s favour given the likely relatively small quantum of such entitlement at the commencement of cohabitation based on its pay out value ten years after the marriage, and the other contributions of the wife over the parties’ very long term marriage.

58.  The husband in his affidavit described the agreement in relation to the cane farm as follows:

“29.          The agreement between my Father and myself for transfer of the cane farm was that no capital monies were to be paid for the assets.  [F] was to pay my parents a lien payment of 10 per cent of the gross cane proceeds which were subsequently received in respect of the farm and such payments were to continue during my Father’s lifetime.  Although he didn’t need the lien payment as income (he already had his own pension) it would provide him with a small bank of capital for any extra needs that he might have, in view of the fact that he was transferring all of the cane farm capital, which was his major asset, to [F].”

59.  [F] was a company incorporated by the parties and which held the crop, plant and equipment and distributed income received from the cane farm.  Both parties agree total lien payments of $114,940.89 were paid between 1982 and the husband’s father’s death in 1994.  The wife’s evidence, which was not challenged, and which was substantially in accord with the husband’s evidence was that the parties paid one payment of $16,000 and not two.  According to the wife this was $16,000 to enable the husband’s parents to complete their retirement home, however the husband deposed that the payment of $16,000 to his father was to pay his tax, and does not agree any sums were paid to assist with the completion of his parent’s retirement home.  However, there is no dispute that total payments of at least approximately $130,000 were received from the parties by the husband’s parents, that the source of part of such payments was the parties’ savings from the sale of the second property, the husband’s accrued annual leave and DFRDB payout, and partly from income generated by the parties’ operation of the cane farm.

60.  We are satisfied that  the trial Judge assessed contributions in the ratio of 65 per cent for the husband and 35 per cent for the wife having regard essentially to three contributions by or on behalf of the husband, namely the husband’s initial DFRDB entitlement, the “gift” of the farm, and the husband’s inheritance.  This resulted in the husband receiving approximately $710,000 more than the wife.

61.  We have already discussed the question of the husband’s initial contributions.  The trial Judge made a finding that there was no suggestion that the transfer by the husband’s parents to him of the cane farm was anything but an inter vivos gift, and that the payment of $16,000 by the parties to the husband’s parents, or the lien payments altered the basic character of the transaction.

62.  Regardless of whether the transaction in respect of the cane farm was an inter vivos gift, or transfer subject to the lien payments in respect of the gross proceeds of the cane farm (the latter being in accord with the husband’s own evidence), the acquisition of the farm was a substantial contribution on behalf of the husband by his parents as was his inheritance in 1994.  However, those contributions must be weighed and balanced against the myriad of other contributions made by the wife during the course of the marriage, including the period of over twenty years prior to separation, of the occupation and operation of the cane farm.  We are also satisfied whilst the parties may not have had a strict legal obligation to pay the $16,000 from their savings to the husband’s parents, or to make the lien payments as consideration for the cane farm, those payments were made and accepted by the husband’s parents thus depleting in part the parties’ savings and income otherwise available to them to acquire other assets.

63.  It appears to us that the trial Judge in paragraphs 60 and 61 of his judgment has adopted a quasi mathematical basis for his conclusions on contribution and in so doing has given insufficient weight to the wife’s contributions, and has undervalued those contributions, particularly having regard to his findings at paragraph 63 as follows: 

“I am also satisfied that she continued to contribute to the farm financially in indirect ways and non-financially under s 79(4)(c) for nearly 20 years. However, I find that her involvement in the business conducted on the farm was largely limited to that of a supportive spouse, predominantly in the role of homemaker rather than as a business partner or offsider. The success of the business during the marriage is clearly due mainly to the business acumen and hard work of the husband.

64.  The weight to be given to disparate contributions, particularly in a very long term marriage such as this one is subject of well known authority (see Mallet v Mallet (1984) 156 CLR 605; Ferraro and Ferraro (1993) FLC 92-335). In Ferraro the Full Court at 79,572 noted the difficulty in comparing parties’ respective contributions, albeit not having regard to, as in this case, a significant external injection of funds, as follows:

“The task of evaluating and comparing the parties’ respective contributions where one party has exclusively been the breadwinner and the other exclusively the homemaker, is a most difficult one to perform because the evaluation and comparison cannot be conducted on a “level playing field”. Firstly, it involves making a crucial comparison between fundamentally different activities, and a comparison between contributions to property and contributions to the welfare of the family. Secondly, whilst a breadwinner contribution can be objectively assessed by reference to such things as that party’s employment record, income and the value of the assets acquired, an assessment of the quality of a homemaker contribution to the family is vulnerable to subjective value judgments as to what constitutes a competent homemaker and parent and can not be readily equated to the value of assets acquired. This leads to a tendency to undervalue the homemaker role.” 

65.   Later in the judgment the Full Court adopted with approval the passage in Dawes and Dawes (1990) FLC 92-108 which we find is apposite in this case:

“The passage from Dawes, supra, at 77,729, is a recent authority of the Full Court emphasizing the significance in cases of this sort under para (b) of the contribution which a wife and homemaker makes to the business assets controlled by the husband. 

The Full Court said:

‘Although it is difficult, as it always is in such cases, to put one’s finger squarely on what led his Honour to so undervalue the wife’s contribution, we think that one significant matter which did so was that he failed to give any weight to the fact that the wife’s performance of her role as homemaker and parent during the 30 years of cohabitation was not just a contribution under sec. 79(4)(c) (which he subsequently recognised to some degree) but was also a significant contribution under sec. 79(4)(b).’

66.  In Mallet (supra) Gibbs CJ said that the balancing of financial and homemaker contributions depends “entirely on the facts of the case”.  The High Court rejected equality as a starting point, with Mason J (with whom Deane J concurred) noting instead that:

“…the Court must in a given case evaluate the respective contributions of husband and wife under para. (a) and (b) of subsec. [79](4), difficult though that may be in some cases.  In undertaking this task it is open to the Court to conclude on the materials before it that the indirect contribution of one party as homemaker or parent is equal to the financial contributions made to the acquisition of the matrimonial home on the footing that that party's efforts as homemaker and parent have enabled the other to earn an income by means of which the home was acquired and financed during the marriage. To sustain this conclusion the materials before the Court will need to show an equality of contribution – that the efforts of the wife in her role were the equal of the husband in his. 

No doubt a conclusion in favour of equality of contribution will be more readily reached where the property in issue is the matrimonial home or superannuation benefits or pension entitlements and the marriage is of long standing. It will be otherwise when the property in issue consists of assets acquired by one party whose ability and energy has enabled the establishment or conduct of an extensive business enterprise to which the other party has made no financial contribution and where the other party's role does not extend beyond that of homemaker and parent.” 

67.  Although the acquisition of the cane farm and the inheritance were not initial contributions of the husband, we do not disagree with the trial Judge’s reference to the principles enunciated in Pierce v Pierce (1999) FLC 92-844, particularly at paragraph 28 when the Full Court said:

“In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home…”

68.  We are satisfied those principles are appropriate in this matter.

69.  However, we are of the opinion that the trial Judge’s assessment of contribution was in error.  The evidence does not support a finding that the cane farm could be regarded as “an extensive business enterprise”.  A disparity in the parties’ entitlements which results in the husband receiving the first $710,639 of the parties’ net assets does not properly reflect the wife’s contributions during a very long term marriage, those contributions spanning the period before the acquisition of the cane property, and for over twenty years after its acquisition, and is outside the reasonable ambit of discretion.  Accordingly we find Grounds 1, 2 and 3 are established.

Issues relevant to assessment under s 75(2)

70.  Ground 7 attacks the trial Judge’s assessment of relevant factors under s 75(2).  It is submitted on behalf of the wife that the trial Judge gave insufficient weight to the disparity in the parties’ assets as a result of the trial Judge’s contribution findings, and the wife’s lack of workforce skills.  It is submitted that an appropriate adjustment to be made in the wife’s favour in respect of these factors requires an adjustment of 15 per cent or $359,640.  This submission was qualified by the concession by counsel for the wife that if the wife’s contribution entitlement was 45 per cent, then the appropriate adjustment under s 75(2) would be 5 per cent.  Before us the wife’s counsel confirmed the position adopted before the trial Judge namely that she would be prepared to accept her entitlement by immediate payment of 40 per cent of the asset pool, and the balance of her entitlement treated as “vendor finance” to be repaid when the husband sold the farm or on his retirement.  It was also conceded that in the event the wife’s overall property entitlement was increased by 5 per cent, the wife would not pursue her spousal maintenance claim.

71.  On behalf of the husband it was submitted that an adjustment of 2.5 per cent or $59,940 for relevant factors under s 75(2) was appropriate in this case.  It is submitted that the husband needs to retain the farm to exercise his income earning potential.  It is further submitted by counsel for the husband that the husband has incurred a debt of $200,000 to pay the wife’s entitlements under the trial Judge’s orders, and contrasts this position with that of the wife who “is debt-free.  She retains a renovated, inner city home in Brisbane, a modern vehicle, more furniture than the husband, $200,000 in cash, $85,000 in superannuation and half the husband’s DFRDB pension” .

Discussion – s 75(2) factors

72.  There is no dispute that the two predominant matters requiring consideration by the trial Judge under s 75(2) were the disparity in the parties’ financial positions as a result of the trial Judge’s contribution based assessment, that assessment resulting in a 30 per cent or approximately $710,000 difference in favour of the husband, and the wife’s lack of earning capacity as a result of her homemaker role over a very lengthy marriage. 

73.  In the circumstances of this case, where the trial Judge found the wife’s contribution based entitlement to be 35 per cent, we cannot agree with his finding that an adjustment of 2.5 per cent or approximately $59,000 was one, as his Honour commented, which some may see as “overly generous”.

74.  The contrast in the parties’ earning capacity was stark.  At the date of trial both parties were noted by the trial Judge to be in their late 50’s.  The husband gave evidence about his retirement as follows:

“What age do you plan to retire at?---When I – I’m not sure.  Maybe in – maybe in 10 years, but it’ll depend upon my circumstances.”

75.  The husband was an experienced manager of the cane farm, and the trial Judge’s finding that if the husband sold the farm “he could obtain gainful employment as a farm manager or some similar occupation” is not challenged.  The wife had not worked in outside employment for over 30 years having ceased employment in 1973. Her evidence that she had no qualifications for employment is not challenged.  At the time of the trial the wife was undertaking some volunteer work.

Conclusions – s 75(2)

76.  Our conclusion that the trial Judge’s contribution assessment miscarried makes it unnecessary for us to consider the submission made on behalf of the wife that the adjustment in her favour under s 75(2) should be 15 per cent if her contribution entitlement is 35 per cent.

77.  We are satisfied that the reality of the wife’s situation is that her income earning capacity in the paid workforce is non existent, or at best likely to be very modest having regard to her age and lack of current workforce skills (see Mitchell and Mitchell (1995) FLC 92-601 at 81,997). This factor, prima facie, indicates some adjustment to the wife is warranted under s 75(2). That adjustment must be considered in the light of the quantum of the contribution entitlements of the parties.

The just and equitable ground

78.  It is submitted on behalf of the wife that the trial Judge’s assessment at the “fourth step” is flawed, and that the orders made are not just and equitable.

79.  There is no dispute between the parties about the asset mix the parties should retain.  The parties each sought orders that they each receive one half of the husband’s DFRDB superannuation entitlement.  This appears in the list of the parties’ assets as $310,247 that, no doubt, being its value calculated in accordance with the regulations or the industry specific valuation criteria.  As each party is to receive one half of this entitlement payable by way of pension this does not impact on the justice and equity of the orders.  The husband’s evidence at trial was that he had the capacity to borrow funds to enable a payment to the wife to effect a 40 per cent division of the assets and still retain the cane farm,  and one half of the DFRDB.

80.  Having regard to our conclusion that the trial Judge’s assessment of the parties’ contribution based entitlements is in error, we are satisfied that in the circumstances of this long marriage orders which result in the wife receiving 37.5 per cent or $888,296 compared with the husband’s entitlement of 62.5 per cent or $1,480,495 is neither just or equitable.

The re-exercise of the discretion

81.  We have concluded that the trial Judge gave insufficient weight to the wife’s contributions throughout the parties’ long marriage, including an undervaluation of her indirect financial contribution to the cane farm.  The exercise of balancing contributions, as the trial Judge recognised, is not an accounting exercise, nor does a long term marriage lead to a presumption of equality of contribution.  In the circumstances of this case we are satisfied that whilst significant weight should be afforded to the three items of financial contribution identified by the trial Judge, to afford those contributions such weight as to result in a differential of 30 per cent or $710,639 fails to adequately recognise and give weight to the many contributions of the wife including her contributions to the cane farm, her directorship and shareholding in [F], and substantial homemaker and parenting role.  We are satisfied that a proper evaluation of the parties’ contributions is reflected in a contribution based finding of 60 per cent to the husband and 40 per cent to the wife.  This differential of 20 per cent or an additional $479,521 to the husband properly reflects the financial contributions by the husband or made on his behalf.  Accordingly the husband’s contribution based entitlement is 60 per cent or $1,438,564 and the wife’s entitlement is 40 per cent or $959,042.

82.  There is no challenge about the assets as found by the trial Judge.  They are:

ASSETS
[RH] House	W	367,000
Subaru	W	27,000
Furniture	W	6,530
Cash at Bank	W	15,985
Paid Legal Fees	W	38,000
Superannuation Benefits	W	42,544
Farm	H	1,390,000
Subaru	H	5,000
Furniture	H	5,600
Equipment	H	62,500
Cattle	H	35,682
[WT] Shares	H	12,195
CBA Premium	H	2,374
CBA Streamline	H	2,300
Superannuation Benefits	W	42,544
Paid Legal Fees	H	13,059
Defence Force Benefits	J	310,247
Shares	H	28,815
Total Assets	2,407,375
LIABILITIES
ATO	W	860
ATO	H	3,332
[JG]	H	1,177
GST	H	4,400
Total Liabilities	9,769
TOTAL ASSETS AND LIABILITIES	2,397,606

83.  The DFRDB is payable to both the husband and wife, not as a lump sum as shown in the table of assets, but by way of pension at the rate of $190 per week.

84.  We are satisfied, as very properly recognised by the wife’s counsel, the increase in the wife’s contribution based entitlement is relevant when re-exercising the discretion in respect of s 75(2).  As a result of our determination of contribution based entitlement, the disparity between the parties’ entitlements is significantly reduced from $710,639 to $479,521.  In these circumstances we are satisfied that the adjustment of 5 per cent or $119,880 which the wife contends would be appropriate if she received a contribution based entitlement of 45 per cent, but found by us to be 40 per cent, is not sustainable.

85.  We do not find that the trial Judge took into account any irrelevant matter or that he failed to have appropriate regard to relevant factors in his assessment of factors under s 75(2).  Accordingly, we are satisfied that the trial Judge’s assessment of s 75(2) factors warranting a 2.5 per cent adjustment in the wife’s favour is appropriate notwithstanding that there has been a diminution in the disparity of the husband’s capital position to that of the wife of $231,118 as a result of our contribution based findings.  Thus the husband will retain assets to the value of 57.5 per cent or $1,378,623 and the wife will retain assets to the value of 42.5 per cent or $1,018,983.

Consideration of whether the orders are just and equitable

86.  As a result of our determination the husband will receive the following:

HUSBAND WILL RETAIN
Farm	1,390,000
Subaru	5,000
Furniture	5,600
Equipment	62,500
Cattle	35,682
[WT] Shares	12,195
CBA Premium	2,374
CBA Streamline	2,300
Paid Legal Fees	13,059
Defence Force Benefits	155,124
Shares	28,815
Total Assets	1,712,649
LIABILITIES
ATO	3,332
[JG]	1,177
GST	4,400
Total Liabilities	8,909
TOTAL ASSETS AND LIABILITIES	1,703,740
Adjustment by Husband*	325,117
Husband's entitlement	1,378,623

87.  The wife will receive the following:

WIFE WILL RETAIN
[RH] House	367,000
Subaru	27,000
Furniture	6,530
Cash at Bank	15,985
Paid Legal Fees	38,000
Superannuation Benefits	42,544
Superannuation Benefits	42,544
Defence Force Benefits	155,123
Total Assets	694,726
LIABILITIES
ATO	860
Total Liabilities	860
TOTAL ASSETS AND LIABILITIES	693,866
Adjustment by Husband*	325,117
Wife's entitlement	1,018,983

*The wife has received $193,569 of this sum pursuant to Carmody J’s orders.

88.  The wife has indicated through her counsel that she will consent to an order that 2.5 per cent of her entitlement need not be paid until the husband sells the cane farm or retires.  This will enable the husband to continue operating the farm, as he proposes, probably for the next ten years and derive an income from the farm.  The wife has conceded in these circumstances that she does not press her spousal maintenance claim, or the grounds directed to the trial Judge’s treatment of her application for spousal maintenance.

89.  We are satisfied having regard to the asset mix to be retained by each of the parties, the husband’s concession that he can fund borrowings to pay out the wife such additional sum as is required to reflect a 40 per cent adjustment in her favour, and the wife’s concession that she does not press for immediate payment of 2.5 per cent of her entitlement, that orders which require an additional sum of $131,548 (ie $325,117 - $193,569 = $131,548) to be paid to the wife are just and equitable.

Form of orders

90.  It was conceded before us by both parties’ counsel that the orders of Carmody J have been implemented.  It is also conceded by the wife that she does not require immediate payment to her of the whole of the increased sum, but is prepared to provide 2.5 per cent of her total entitlement, that is the sum of $59,940, which her counsel described as “vendor finance” to be paid on or before the husband’s retirement or on sale of the cane farm whichever event first occurred.  Counsel for the wife submitted that such vendor finance should be subject to security and an appropriate interest rate.

Costs

91.  The primary submission of the parties in respect of costs were that certificates should be granted under the terms of the Federal Proceedings (Costs) Act 1981 (Cth).

ORDERS

1. That the appeal be allowed.

1. That order 9 of the orders of Carmody J of 9 September 2004 be discharged.

1. That the husband pay to the wife or as she may direct by cash or bank cheque the further sum of $131,548 as follows:

   (a)    within 42 days of the date of these orders the sum of $71,608;

   (b)   on or before the retirement of the husband or the sale of the cane farm whichever event shall first occur the sum of $59,940 together with interest at the standard variable home loan rate published from time to time and charged by the Commonwealth Bank of Australia calculated from the date of this order until the date of payment.

2. To secure the wife’s entitlements under order 3(b) the wife may at her sole cost and expense lodge a caveat against the title of the cane farm.

1. To facilitate payment by the husband of the sum provided in order 3(b) the wife shall simultaneously with payment to her of the sum due pursuant to 3(b) provide to the husband or as he may direct in registrable form a Withdrawal of Caveat.

1. The Court grants to the appellant wife a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney General to authorise a payment under that Act to the appellant wife in respect of the costs incurred by the appellant wife in relation to the appeal.

1. The Court grants to the respondent husband a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney General to authorise a payment under that Act to the respondent husband in respect of the costs incurred by the respondent husband in relation to the appeal.

I certify that the preceding 91 paragraphs
are a true copy of the reasons
for judgment delivered by
this Honourable Full Court.



Associate